Micron Technology, Inc.
Sep 20, 2018
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Micron Technology, Inc., Reports Results for the Fourth Quarter and Full Year of Fiscal 2018

Record FY18 revenue over $30 billion driven by strong execution and diverse demand growth

BOISE, Idaho, Sept. 20, 2018 (GLOBE NEWSWIRE) -- Micron Technology, Inc., (NASDAQ: MU) today announced results of operations for its fourth quarter and full year of fiscal 2018, which ended August 30, 2018.

Fiscal Q4 2018 highlights

Fiscal 2018 highlights

"Micron delivered an exceptional fourth quarter and capped record fiscal year results by becoming the second largest semiconductor company in the U.S.," said Sanjay Mehrotra, President and CEO of Micron Technology. "In the fourth quarter, we set revenue records across all our major markets, from automotive and industrial to mobile and cloud datacenters. The secular and diversified growth drivers in our industry combined with accelerating pace of transformation of the new Micron form a tremendous catalyst for us to create enduring value for our customers and investors in 2019 and the years ahead."

 
Quarterly Financial Results
(in millions, except per share amounts)GAAP (1) Non-GAAP (2)
FQ4-18FQ3-18FQ4-17 FQ4-18FQ3-18FQ4-17
Revenue$8,440 $7,797 $6,138  $8,440 $7,797 $6,138 
Gross margin$5,151 $4,723 $3,112  $5,179 $4,750 $3,147 
percent of revenue 61.0%  60.6%  50.7%   61.4%  60.9%  51.3% 
Operating income$4,377 $3,953 $2,502  $4,439 $4,017 $2,546 
percent of revenue 51.9%  50.7%  40.8%   52.6%  51.5%  41.5% 
Net income attributable to Micron$4,325 $3,823 $2,368  $4,313 $3,898 $2,386 
Diluted earnings per share$3.56 $3.10 $1.99  $3.53 $3.15 $2.02 
                    


Annual Financial Results
(in millions, except per share amounts)GAAP (1) Non-GAAP (2)
FY 18FY 17 FY 18FY 17
Revenue  $30,391 $20,322  $30,391 $20,322 
Gross margin  $17,891 $8,436  $17,994 $8,639 
percent of revenue   58.9%  41.5%   59.2%  42.5% 
Operating income  $14,994 $5,868  $15,243 $6,232 
percent of revenue   49.3%  28.9%   50.2%  30.7% 
Net income attributable to Micron  $14,135 $5,089  $14,700 $5,648 
Diluted earnings per share  $11.51 $4.41  $11.95 $4.96 
                

Revenues for the fourth quarter of 2018 were 8 percent higher compared to the third quarter of 2018, reflecting increased demand broadly across our products and end markets. Our overall gross margin was 61.0 percent for the fourth quarter of 2018 compared to 60.6 percent in the third quarter benefiting from strong execution across our product portfolio.

Investments in capital expenditures, net of amounts funded by partners, were $2.06 billion for the fourth quarter of 2018 and $8.20 billion for the full year of 2018, which resulted in adjusted free cash flows(3) of $3.09 billion for the fourth quarter of 2018 and $9.20 billion for the full year of 2018. We repurchased or converted $2.23 billion principal amount of our debt during the quarter and $6.96 billion for the full year of 2018, lowering our total carrying value of debt to $4.64 billion exiting the fiscal year. We ended the fourth quarter in a record net cash position of $2.72 billion with cash, marketable investments, and restricted cash of $7.36 billion.

We will host a conference call on Thursday, September 20, 2018 at 2:30 p.m. MT to discuss our financial results. The call, audio, and slides will be available online at investors.micron.com. A webcast replay will be available on our website until September 20, 2019. A taped audio replay of the conference call will also be available at 1-404-537-3406 or 1-855-859-2056 (conference number: 5685754) beginning at 5:30 p.m. MT, Thursday, September 20, 2018 and continuing through Thursday, September 27, 2018. For Investor Relations and other company updates, follow @MicronTech on Twitter at twitter.com/MicronTech.

We are an industry leader in innovative memory and storage solutions. Through our global brands — Micron®, Crucial® and Ballistix® — our broad portfolio of high-performance memory and storage technologies, including DRAM, NAND, NOR Flash and 3D XPoint™ memory, is transforming how the world uses information to enrich life. Backed by 40 years of technology leadership, our memory and storage solutions enable disruptive trends, including artificial intelligence, machine learning, and autonomous vehicles, in key market segments like cloud, data center, networking and mobile. Our common stock is traded on the NASDAQ under the MU symbol. To learn more about Micron Technology, Inc., visit micron.com.

The Micron logo and Micron symbol are trademarks of Micron Technology, Inc. All other trademarks are the property of their respective owners.

This press release contains forward-looking statements regarding the industry and our strategic position and financial results. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially. Please refer to the documents we file with the Securities and Exchange Commission, specifically our most recent Form 10-K and Form 10-Q. These documents contain and identify important factors that could cause our actual results to differ materially from those contained in these forward-looking statements. These certain factors can be found at www.micron.com/certainfactors. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We are under no duty to update any of the forward-looking statements after the date of this release to conform these statements to actual results.

(1) GAAP represents U.S. Generally Accepted Accounting Principles.
(2) Non-GAAP represents GAAP excluding the impact of certain activities which our management excludes in analyzing our operating results and understanding trends in our earnings. Non-GAAP also includes the impact on shares used in per share calculations of our outstanding capped call transactions and from the exclusion of stock-based compensation. For a reconciliation of GAAP to non-GAAP results, see the accompanying financial tables and footnotes.
(3) Adjusted free cash flow consists of cash provided by operating activities of $5.16 billion for the fourth quarter of 2018 and $17.40 billion for the full year of 2018 less investments in capital expenditures, net of amounts funded by partners, for the respective periods.

 
MICRON TECHNOLOGY, INC.
CONSOLIDATED FINANCIAL SUMMARY
(in millions except per share amounts)
         
  4th Qtr. 3rd Qtr. 4th Qtr. Year Ended
  August 30,
 2018
 May 31,
 2018
 August 31,
 2017
 August 30,
 2018
 August 31,
 2017
Net sales $8,440  $7,797  $6,138  $30,391  $20,322 
Cost of goods sold 3,289  3,074  3,026  12,500  11,886 
Gross margin 5,151  4,723  3,112  17,891  8,436 
Selling, general, and administrative 215  211  193  813  743 
Research and development 567  603  447  2,141  1,824 
Other operating (income) expense, net (8) (44) (30) (57) 1 
Operating income 4,377  3,953  2,502  14,994  5,868 
Interest income (expense), net (16) (44) (132) (222) (560)
Other non-operating income (expense), net (1) (15) (193) (49) (465) (112)
Income tax (provision) benefit (2) (20) 109  47  (168) (114)
Equity in net income (loss) of equity method investees   (2) 1  (1) 8 
Net (income) attributable to noncontrolling interests (1)   (1) (3) (1)
Net income attributable to Micron $4,325  $3,823  $2,368  $14,135  $5,089 
           
Earnings per share          
Basic $3.73  $3.30  $2.13  $12.27  $4.67 
Diluted 3.56  3.10  1.99  11.51  4.41 
           
Number of shares used in per share calculations          
Basic 1,159  1,159  1,109  1,152  1,089 
Diluted 1,216  1,235  1,187  1,229  1,154 
                


 
CONSOLIDATED FINANCIAL SUMMARY, Continued
       
As of August 30,
 2018
 May 31,
 2018
 August 31,
 2017
Cash and short-term investments $6,802  $7,071  $5,428 
Receivables 5,478  4,912  3,759 
Inventories 3,595  3,369  3,123 
Total current assets 16,039  15,499  12,457 
Long-term marketable investments 473  487  617 
Property, plant, and equipment, net 23,672  22,705  19,431 
Restricted cash 81  119  107 
Total assets 43,376  41,845  35,336 
       
Accounts payable and accrued expenses 4,611  3,998  3,664 
Current debt (1) 859  1,454  1,262 
Total current liabilities 5,754  5,883  5,334 
Long-term debt (1) 3,777  5,890  9,872 
       
Total Micron shareholders' equity (3) 32,294  28,649  18,621 
Noncontrolling interests in subsidiaries 870  869  849 
Total equity 33,164  29,518  19,470 
          


   
  Year Ended
  August 30,
 2018
 August 31,
 2017
Net cash provided by operating activities $17,400  $8,153 
Net cash provided by (used for) investing activities (8,216) (7,537)
Net cash provided by (used for) financing activities (7,776) 349 
     
Depreciation and amortization 4,860  3,986 
Investments in capital expenditures (9,085) (5,253)
Acquisition of Inotera   (2,634)
Repayments of debt (10,194) (2,558)
Proceeds from issuance of stock (3) 1,655  142 
Proceeds from issuance of debt 1,009  3,311 
       
  1. In the fourth quarter of 2018, we prepaid or repurchased debt with an aggregate principal amount of $2.00 billion and recognized non-operating losses of $9 million. In addition, we settled convertible notes with an aggregate principal amount of $228 million for cash of $1.27 billion and recognized non-operating gains of $25 million. As of August 30, 2018, $35 million of aggregate principal amount of our convertible notes had converted but will not settle until the first quarter of 2019. As a result of the unsettled conversions, the carrying value of debt increased by $132 million as of August 30, 2018 and we recognized non-operating losses of $15 million in the fourth quarter of 2018.

    In the third quarter of 2018, we prepaid debt with an aggregate principal amount of $2.08 billion and recognized non-operating losses of $42 million. In addition, we repurchased or settled convertible notes with an aggregate principal amount of $228 million for cash of $1.11 billion and recognized non-operating losses of $32 million. In the second quarter of 2018, we settled convertible notes with an aggregate principal amount of $65 million for cash of $295 million. In the first quarter of 2018, we redeemed notes with an aggregate principal amount of $2.25 billion for cash of $2.42 billion and recognized non-operating losses of $190 million.

    During 2018, Intel Corporation provided non-interest bearing convertible debt financing of $1.01 billion to IM Flash Technologies, LLC ("IMFT") pursuant to the terms of the IMFT joint venture agreement.

  2. On December 22, 2017, the United States enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act") which lowers the U.S. corporate income tax rate from 35% to 21% and significantly affects how income from foreign operations is taxed in the United States. As a result of our fiscal year-end, our U.S. statutory federal rate was 25.7% for 2018 (based on the 35% corporate rate through December 31, 2017 and 21% from that date through the end of fiscal year 2018) and will be 21% for subsequent years. The Tax Act imposed a one-time transition tax in 2018 on the higher of accumulated foreign income, as determined as of November 2, 2017 or December 31, 2017 (the "Repatriation Tax"); provided a U.S. federal tax exemption on foreign earnings distributed to the United States; and, beginning in 2019, creates a new minimum tax on certain foreign earnings in excess of a deemed return on tangible assets (the "Foreign Minimum Tax"). The Tax Act allows us to elect to pay any Repatriation Tax due in eight annual interest-free payments in increasing amounts beginning in December 2018.

    The Securities and Exchange Commission Staff Accounting Bulletin No. 118 allows the use of provisional amounts (reasonable estimates) if our analyses of the impacts of the Tax Act has not been completed when our financial statements are issued. The provisional amounts below were revised during 2018 and represent reasonable estimates of the effects of the Tax Act for which the analysis is not yet complete. Our income tax (provision) benefit consisted of the following:
  4th Qtr. 3rd Qtr. 4th Qtr. Year Ended
  August 30,
 2018
 May 31,
 2018
 August 31,
 2017
 August 30,
2018
 August 31,
2017
Provisional estimate for the Repatriation Tax, net of adjustments related to uncertain tax positions $83  $222  $  $(1,030) $ 
Remeasurement of deferred tax assets and liabilities reflecting the lower U.S. corporate tax rates       (133)  
Provisional estimate for the release of the valuation allowance on the net deferred tax assets of our U.S. operations       1,337   
Utilization of and other changes in net deferred tax assets of MMJ, MMT, and MTTW 10  (35) 106  (68) 54 
Other income tax (provision) benefit (113) (78) (59) (274) (168)
  $(20) $109  $47  $(168) $(114)
                     
  1. In October 2017, we issued 34 million shares of our common stock in a public offering for $41.00 per share for proceeds of $1.36 billion, net of underwriting fees and other offering costs.
 
MICRON TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(in millions, except per share amounts)
      
 4th Qtr. 3rd Qtr. 4th Qtr.
 August 30, 2018 May 31, 2018 August 31, 2017
 GAAPAdjNon-GAAP GAAPAdjNon-GAAP  GAAPAdjNon-GAAP
Net sales$8,440 $ $8,440  $7,797 $ $7,797  $6,138 $ $6,138 
Cost of goods sold3,289 (28)3,261  3,074 (27)3,047  3,026 (35)2,991 
Gross margin5,151 28 5,179  4,723 27 4,750  3,112 35 3,147 
percent of revenue 61.0%   61.4%   60.6%   60.9%   50.7%   51.3% 
                  
Selling, general, and administrative215 (13)202  211 (14)197  193 (22)171 
Research and development567 (14)553  603 (15)588  447 (14)433 
Other operating (income) expense, net(8)(7)(15) (44)(8)(52) (30)27 (3)
Operating expenses774 (34)740  770 (37)733  610 (9)601 
Operating income (loss)4,377 62 4,439  3,953 64 4,017  2,502 44 2,546 
percent of revenue 51.9%   52.6%    50.7%   51.5%   40.8%   41.5% 
                  
Interest income (expense), net(16)23 7  (44)23 (21) (132)32 (100)
Other non-operating income (expense), net(15)14 (1) (193)194 1  (49)49  
 4,346 99 4,445  3,716 281 3,997  2,321 125 2,446 
            
Income tax (provision) benefit(20)(111)(131) 109 (206)(97) 47 (107)(60)
Equity in net income (loss) of equity method investees    (2) (2) 1  1 
Net income (loss)4,326 (12)4,314  3,823 75 3,898  2,369 18 2,387 
            
Net income (loss) attributable to noncontrolling interests(1) (1)     (1) (1)
Net income (loss) attributable to Micron$4,325 $(12)$4,313  $3,823 $75 $3,898  $2,368 $18 $2,386 
            
Shares used in calculations1,216 4 1,220  1,235 3 1,238  1,187 (6)1,181 
Diluted earnings (loss) per share$3.56 $(0.03)$3.53  $3.10 $0.05 $3.15  $1.99 $0.03 $2.02 
                              


    
 Year Ended Year Ended
 August 30, 2018 August 31, 2017
 GAAPAdjNon-GAAP GAAPAdjNon-GAAP
Net sales$30,391 $ $30,391  $20,322 $ $20,322 
Cost of goods sold12,500 (103)12,397  11,886 (203)11,683 
Gross margin17,891 103 17,994  8,436 203 8,639 
percent of revenue 58.9%   59.2%   41.5%   42.5% 
            
Selling, general, and administrative813 (61)752  743 (88)655 
Research and development2,141 (57)2,084  1,824 (55)1,769 
Other operating (income) expense, net(57)(28)(85) 1 (18)(17)
Operating expenses2,897 (146)2,751  2,568 (161)2,407 
Operating income (loss)14,994 249 15,243  5,868 364 6,232 
percent of revenue 49.3%   50.2%   28.9%   30.7% 
            
Interest income (expense), net(222)101 (121) (560)125 (435)
Other non-operating income (expense), net(465)465   (112)112  
 14,307 815 15,122  5,196 601 5,797 
        
Income tax (provision) benefit(168)(250)(418) (114)(59)(173)
Equity in net income (loss) of equity method investees(1) (1) 8 17 25 
Net income (loss)14,138 565 14,703  5,090 559 5,649 
        
Net income (loss) attributable to noncontrolling interests(3) (3) (1) (1)
Net income (loss) attributable to Micron$14,135 $565 $14,700  $5,089 $559 $5,648 
        
Shares used in calculations1,229 1 1,230  1,154 (14)1,140 
Diluted earnings (loss) per share$11.51 $0.44 $11.95  $4.41 $0.55 $4.96 
                    


 
MICRON TECHNOLOGY, INC.
NON-GAAP ADJUSTMENTS
(in millions)
        
 4th Qtr. 3rd Qtr. 4th Qtr. Year Ended
 August 30, 2018 May 31, 2018 August 31, 2017 August 30, 2018 August 31, 2017
Non-GAAP adjustments         
Cost of goods sold         
Stock-based compensation$21  $20  $22  $83  $88 
Flow-through of Inotera inventory step up    11    107 
Other7  7  2  20  8 
 28  27  35  103  203 
          
Selling, general, and administrative         
Stock-based compensation13  14  22  61  75 
Inotera acquisition costs        13 
 13  14  22  61  88 
          
Research and development         
Stock-based compensation13  14  13  54  52 
Other1  1  1  3  3 
 14  15  14  57  55 
          
Other operating (income) expense, net         
Restructure and asset impairments7  8  (27) 28  18 
          
Interest income (expense), net         
Amortization of debt discount and other costs23  23  32  101  125 
          
Other non-operating income (expense)         
(Gain) loss on debt repurchases and conversions(1) 168  37  385  100 
(Gain) loss from changes in currency exchange rates15  24  12  75  74 
(Gain) loss from business acquisition activities        (71)
Other  2    5  9 
 14  194  49  465  112 
          
Income taxes         
Impact of U.S. income tax reform(83) (222)   (174)  
Estimated tax effects of above, including tax benefits from stock-based compensation, and non-cash changes in net deferred income taxes(28) 16  (107) (76) (59)
 (111) (206) (107) (250) (59)
          
Equity in net income (loss) of equity method investments         
Impairment of equity method investments        16 
Other        1 
         17 
 $(12) $75  $18  $565  $559 
                    

The tables above reconcile GAAP to non-GAAP results, diluted shares, and diluted earnings per share. The non-GAAP adjustments above may or may not be infrequent or nonrecurring in nature but are a result of periodic or non-core operating activities. We believe this non-GAAP information is helpful to understanding trends and in analyzing our operating results and earnings. We are providing this information to investors to assist in performing analysis of our operating results. When evaluating performance and making decisions on how to allocate our resources, management uses this non-GAAP information and believes investors should have access to similar data when making their investment decisions. We believe these non-GAAP financial measures increase transparency by providing investors with useful supplemental information about the financial performance of our business, enabling enhanced comparison of our operating results between periods and with peer companies. The presentation of these adjusted amounts vary from numbers presented in accordance with U.S. GAAP and therefore may not be comparable to amounts reported by other companies.

Our management excludes the following items in analyzing our operating results and understanding trends in our earnings:

Our outstanding capped call transactions are anti-dilutive in GAAP earnings per share but are expected to mitigate the dilutive effect of our convertible notes. In periods with non-GAAP income attributable to Micron, non-GAAP diluted shares include the impact of the capped calls, based on the average share price for the period the capped calls are outstanding. Non-GAAP diluted shares are also adjusted for the impact of additional shares resulting from the exclusion of stock-based compensation from non-GAAP income.

Contacts:

Farhan Ahmad
Investor Relations
farhanahmad@micron.com
(408) 834-1927

David Oro
Media Relations
davidoro@micron.com
(707) 558-8585